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Top Stocks: On Monday, June 3, the benchmarks of the Indian stock market, the Sensex and Nifty 50, both saw significant gains of around 4 percent, reaching all-time highs, with exit polls indicating a resounding victory for the BJP-led NDA in the 2024 Lok Sabha elections. The rally was driven by the expectation of continued policies and political stability.

After the exit polls, the benchmark indices had intraday gains of more than 3%. The Nifty gained 808 points to reach a new height of 23,338.70, while the BSE Sensex surged as much as 2,777.58 points to a record high of 76,738.89.

On June 1, exit polls suggested that the NDA may win 350–370 seats. Though actual outcomes may differ, analysts think it is extremely improbable that a non-NDA government will arise.

Also Read: Adani Group Surges High Before Exit Polls

Top Stocks for long and short term gains

Following the results of the exit poll, market volatility would now subside, and attention would turn to the most likely scenario—that is, the BJP becoming the single-largest party, establishing a stable government, maintaining policy continuity, and rushing through new reforms.

However, in the near run, experts anticipate that domestic cyclical sectors including infrastructure, industrials, defense, capital goods, and cars will continue to be the main beneficiaries, based on the current consensus about the potential outcome of a BJP-led government.

One important industry to watch if the BJP wins is PSU banks.

“We anticipate that, in the short run, following the election results, the small- and mid-cap sectors may outperform the large caps, with a focus on PSUs and domestic cyclical sectors.” said experts. Following that, there may be profit booking due to concerns about a tax change in the lead-up to the Union Budget 2024–25, which is scheduled to be presented in the first week of July 2024, whereas lagging industries like IT, FMCG, and pharmaceuticals would do better, according to a brokerage.

The brokerage offers both short-term and long-term (three to five years) stock selections.
It has identified 34 stocks that it recommends in its short-term post-election list: among them are ICICI Bank, IndusInd Bank, M&M, Hero Moto, Coal India, HAL, BRL, UltraTech Cement, SBI, DLF, BHEL, NTPC, and PFC.

Quick choices

The situation favors stocks such as TVS Motor, L&T, Thermax, Bharat Forge, Trent, Indian Hotels, Sunteck Realty, BPCL, HPCL, and others in its structural selections (long-term for two to three years).

Final Selections

The push for past improvements has begun to bear fruit.
The brokerages point out that in order to improve the Indian economy, Prime Minister Narendra Modi’s BJP-led administration has implemented a number of policy changes over the previous ten years. The Insolvency and Bankruptcy Code and RERA, which were introduced in 2016, are two important measures that streamlined the insolvency procedures and promoted transparency in the real estate industry. According to the report, the Unified Payments Interface (UPI) has had a revolutionary impact, accounting for more than 62% of all digital transactions.

We can anticipate a significant rush toward structural transformation during Modi’s most likely third term, however, the extent of the change would depend on the number of seats gained.

The government has improved multi-modal infrastructure connectivity with the PM Gati Shakti initiative and increased domestic manufacturing through PLI schemes across several industries. Economic measures that have increased company profitability and economic transparency include the establishment of the GST and corporation tax cuts. Sharekhan continued, “These structural reforms have helped to move away from populist measures and toward high GDP growth, fiscal discipline, and efficient capital allocation.”

“We anticipate significant policy reforms for the Ease of Doing Business to attract Foreign Direct Investment (FDI) and sovereign rating upgrades. These reforms, coupled with their inclusion in global bond indices, will drive higher flows into government bonds. Other measures pertaining to judicial reform, the Uniform Civil Code, land bill, a simplified tax code, and bringing more products under the GST ambit will also contribute to the roadmap for Viksit Bharat 2047.” This was recently decoded by popular brokerage firms anticipating that the reforms would probably cover a range of development-related topics, such as social advancement, environmental sustainability, economic growth, and good governance.